Ok, so I've read some of the other threads here and find myself in a similar problem. My situation is a bit different though. Ok, so here's the story. Last week I ordered a iPhone 4S from Sprint and was going to receive it Monday. So, Monday comes along and when I get home from school I look around the house to see if the UPS guy left it at my porch. I didn't find it, so I was like "Maybe it hasn't came yet". I check online to see the order status and find that it was delivered and left on my porch. Now, I live in a bad neighborhood but I've never had anyone jack a package from my front door in the middle of the day. So I call Sprint, tell them the UPS guy left my phone on the porch and it was stolen and they're like "Ok, we'll send you a new one and deactivate the old one useless". The next day, Tuesday, I stay home and wait for my phone, receive it, phone's awesome, everything is cool...until Friday. Friday afternoon, I'm sitting in my room when my dad knocks on my door and tells me if I was waiting on a package. I tell him yeah, because I had ordered a case for my phone but it didn't say it was coming until April. Then he says the next door neighbor dropped off a package that was left at his door on Monday under my name, and that he forgot to give it to me earlier. Anyways, to make a long story short I now have 2 iPhones.

Now then, I'm wondering what to do with this phone. So I'm planning on giving it to my sister, who has really wanted a iPhone, but I wanted to know if that was safe to do because it has bin reported stolen, but it has never bin turned on. I check the ESN of the "stolen" phone and see that it says it is clean. So just to check that the checker works I check the one that I have bin using, the "replacement", to find that the site says it has a bad ESN. So I'm like "what the heck!". Anyways I'm just trying to find some help.
My questions are:
Can I activate the "Stolen" phone since it says it's clean?
Is it safe to even turn on?
What will happen to the phone I've bin using?
Why does it work fine even though it says it has a bad ESN?

ESN of phone I am currently using: 99000101626109
ESN of the "stolen" phone: 99000106986328

The phone you're using has the MEID of 99000101626109. Since the phone is active on your account it shows in red that the device is not clean for activation.

The other phone, which you told Sprint was possibly stolen is now in the process of being flagged in an insurance claim to recoup their money. The MEID may say it's clean now, but I'm almost positive that in a week or so it will be flagged as lost or stolen, and anyone who tries to activate it before it is flagged as lost or stolen will probably have legal issues when Sprint finds out it's active on an account.

The best thing for you to do is package it up and send it in to Sprint to avoid any major mess.

Thanks for the replies. Everyone has bin telling me to return it but I can't see myself doing that. Stuff like this never happens to me. You think I could use it as a iPod or for spare parts in case I break the glass on mine?

I say activate the phone. In my experience working for Sprint the only time they mark an ESN as stolen is when the customer reports it stolen with a Police Report. Otherwise they are more likely to gain a subscriber on that device. Soooooo, If you already notified Sprint activate it because I just checked and it is STILL clear.... they aren't going to waste the amount of resources legal action requires to prosecute you because your neighbor stole your phone on accident!